Currency exchange 101: What to know before you go

After the U.K. recently voted to leave the European Union, Brexit spurred many Americans into suddenly considering the value of the U.S. dollar. Too often, however, even experienced travelers don’t always contemplate all currency conversion options, or when they do it’s at the last minute.

Like many other travel decisions, choosing how to spend money overseas involves a bit of research and an examination of personal choices. The key is making such decisions in advance.

U.S. bargains to Europe may follow 'Brexit'

Constant flux

Like airfares, foreign currencies are constantly changing, and yesterday’s bargain can become today’s bad deal. Meanwhile, the differences in exchange rates can be significant. Consider these online rates for converting $100 (U.S.) into euros, all obtained within minutes last week.

Deutsche Bank: 89.51
ABN AMRO: 89.50
HSBC: 89.49
Citibank: 88.92
Wells Fargo: 85.70
AAA/Travelex: 85.00 (@$101.25)
American Express/Travelex: 85.00 (@$103.82)
Travelex: 85.00 (@$103.82)
Bank of America: 84.76

What’s critical to remember is the rate is meaningless unless calculated with any applicable fees; you may find a low rate coupled with a high fee, while some rates have such fees baked in. It’s all part of the larger equation.

What follows is a run-down of common options for spending overseas.

Cash vs. plastic

It’s 2016 after all, and several financial journalists advise forgoing money altogether and charging everything overseas. But as someone who has often traveled off the grid, I disagree. I’ve found that 1. charge cards aren’t always accepted, and 2. there are often technological glitches when using U.S. cards abroad. Even Discover offers this advice: “Don’t be surprised if your card gets occasionally rejected overseas.”

Some travelers avoid using plastic for fear of racking up foreign transaction fees on credit and debit cards and getting hit with sticker shock when monthly statements arrive; these surcharges usually run between 1% and 3% so they add up quickly. Visit Bankrate.com to compare foreign fee policies among major card issuers.

But there’s good news for card swipers. Capital One and Discover don’t charge foreign transaction fees, which can generate considerable savings. Several other cards, such as the American Express Platinum Card, also don’t levy such fees. Is there a caveat? Of course — in travel, there are always caveats. You STILL may receive charges from ATMs or merchants when using these cards.

Another alternative is an international currency card, such as those offered by American Express or MasterCard. They can be pre-loaded with one or more foreign currencies, for those seeking to play one nation’s exchange rate off another’s. But beware the fees.

And then there’s that old standby, travelers checks. The upside is protection if they’re lost or stolen; the downside includes fewer establishments that honor them and — yes — fees.

Exchanging before you go

• Banks: Many travelers find this option convenient because you can order foreign cash in advance and pick it up before departing without worrying about long lines or conversion mathematics when hitting the ground abroad. Others want the security of immediate cash on hand for taxis or breakfast in case they arrive at an odd time or when ATMs are out of service. The trick is calculating both exchange rates and fees, because this combination determines a beneficial exchange. Some U.S. banks waive fees, except for deliveries. Bank of America, for example, will ship orders up to $1,000, but higher amounts (up to a limit of $10,000) must be obtained in person; there’s no ordering fee but there could be a delivery charge of $7.50 for amounts under $1,000. With Citibank, there’s a $5 service fee on amounts under $1,000 for clients with non-priority accounts.

• Other options: AAA exchanges more than 90 currencies at offices nationwide. Having currency delivered to you is an option — either online or by phone with two-day shipping — though some consumers may harbor concerns about having money shipped. As for rates, AAA states: “Important Notice: The exchange rate used for transactions may vary from other exchange rates in existence globally.” American Express also offers options for exchanging in advance. Both these organizations work through the online foreign currency service Travelex. You can transact with this company directly, either online or at 200 locations nationwide. But first compare the exchange rates with your bank.

Exchanging at airports overseas

When it comes to convenience, nothing beats exchanging at your arrival airport. For example, we looked at three major European airports to see how easy it is to convert U.S. dollars into euros.

Amsterdam/Schiphol
• Eight ABN AMRO branches (open seven days, 6 a.m. - 10 p.m. in winter; seven days, 5 a.m. - 10 p.m. in summer)
• Multiple GWK Travelex exchange offices
• Multiple ATMs

Frankfurt
• Branches for Deutsche Bank, Commerzbank, Reisebank
• Eight exchange offices for International Currency Exchange; Reisebank; Travelex (many are open 24/7)
• 20 ATMs from six banks

Paris/Charles de Gaulle
• One HSBC branch (open Monday - Friday, 8:45 a.m - 5 p.m.)
• 20 Travelex exchange offices (hours vary; coverage spans seven days, 6 a.m. - 11 p.m.)
• 26 HSBC ATMs

At most major airports, there are plenty of choices. In some cases, you can order transactions in advance, but be careful since changes and cancellations may be limited to 12 hours prior to arrival. As for fees, some facilities offer 0% commission while others waive them for account members; otherwise, you may be hit with transaction costs. Before you arrive, visit the airport’s website to learn which facilities are available, and determine fees. Note that many of these exchange facilities also offer locations in hotels, train and bus stations, and downtown areas.

Other options overseas

• Banks: Just as when exchanging at home, it’s important to calculate both exchange rates and fees. If your bank has overseas branches, so much the better, because it might mean waiving fees. If you’re out-of-network, it can pay to research rates and fees.

• ATMs: As many have learned, ATMs can pile on fees, especially outside U.S. borders. You could be hit with a $5 charge PLUS 3% of the amount PLUS any fees levied by the ATM’s provider. Certain cards provide exceptions; for example, Citibank’s Citigold Debit Card charges no fees at Citibank ATMs in more than 30 countries. ThePointsGuy.Com offers tips on avoiding ATM fees. But in many cases, using an ATM can get expensive.

Consider this …

• Before departing, notify your bank or card issuer that you’ll be traveling to avoid suspicion of fraud, and obtain emergency contact info if cards are lost. Remember you may have more luck internationally with a microchip (“EMV”) card, particularly with unmanned purchase points like train kiosks. Also, leave excess plastic — such as department store or gasoline cards — at home.

• If you’re converting before you go, don’t leave yourself short by waiting too long. Each institution limits amounts, so you may be held to $3,000 at once.

• Some conversions round slightly down or up; when I requested $100 in euros from Travelex, for example, I was notified it would total $103.63.

• It may seem wonky, but quickly researching which overseas banks or ATMs honor your plastic without incurring additional fees can really save you. Why not select the one that’s cheapest? Also, be aware that purchases charged in U.S. dollars may carry conversion fees.

• There can be tradeoffs between rates and convenience. Wells Fargo doesn’t charge its customers fees for currency purchases, but it doesn’t have offices outside the U.S. On the other hand, many banks — such as Wells Fargo — offer international access via telephone for assistance when traveling.

• ALWAYS obtain receipts in case you need to dispute a withdrawal or charge.

• I’ve often touted the Fair Credit Billing Act, which protects American consumers when using charge cards, even internationally. The State of Michigan offers an excellent guide for charging overseas.

• If you return home with leftover currency, most banks will buy it back — but only paper, not coins. Again, there could be fees; Citibank charges $5 for this service on amounts under $1,000.

Bill McGee, a contributing editor to Consumer Reports and the former editor of Consumer Reports Travel Letter, is an FAA-licensed aircraft dispatcher who worked in airline operations and management for several years. Tell him what you think of his latest column by sending him an email at travel@usatoday.com. Include your name, hometown and daytime phone number, and he may use your feedback in a future column.